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Grim future for France’s nuclear companies AREVA and EDF

Burdened by losses, EDF’s foreign activities are currently unable to finance the increasing requirements at home, where the production costs of nuclear plants are rising by around 5% each year and investment needs are increasing.

The international trend is not for a nuclear renaissance but for a boom in renewable energy, and France will not be able to export significantly more reactors, or to develop new reprocessing contracts abroad under profitable conditions.

To understand just how far the French nuclear industry has fallen in recent years, look no further than the value of EDF and Areva. Since 2007, EDF’s stock price has fallen more than 70%; Areva’s by more than 85%. If Areva weren’t 83% government-owned, it almost certainly would have declared bankruptcy by now.


plants-downnuClear News July 15 http://www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo75.pdf The deep crisis which the French nuclear industry is experiencing is not new, although it seems to have shocked some commentators. It actually represents the outcome of a strategy launched at the end of the 1990s which was always flawed. The project involved an aggressive export policy which it was hoped would disguise predictable difficulties at home, according to a report by WISE Paris for Greenpeace. (1)

 

 Faced with declining overseas markets and increasing expenditure at a domestic level, EDF and Areva appear to be heading for a terminal decline. The recent industrial restructuring will not save the industry. Only a genuine reorientation can prevent further disaster for the French economy.
Areva has now suffered four years of losses, including a record figure of €4.8 billion in 2014 and debts of €5.8 billion against a turnover of €8.3 billion. The group is facing bankruptcy and cannot sidestep a far-reaching redistribution of its business operations. Despite less worrying results, the EDF group, whose fifty-eight nuclear reactors operated in France provide more than 75% of the country’s electricity, is also experiencing difficulties. Boosted by its turnover of €72.9 billion, the electricity company recorded net profits of €3.7 billion in 2014. But its debt situation – now at €34.2 billion – is increasingly a matter of concern.
In the era of the energy transition, in which France has set itself the objective of lowering the share of nuclear power in its electricity generation to 50% by 2025, the future looks grim for the two companies.

With 8 GW of wind power and 5 GW of solar power installed between 2000 and 2013, France has developed these energy sources 2.5 times slower than the European average. France has only been able to sell three reactors abroad in the last eight years – one to Finland and two to China. But while France is providing political support to domestic and exported nuclear power, it is also neglecting its renewable energy industry. As a result, it is lagging far behind in international competition in this field, particularly in the two sectors currently experiencing massive growth, namely wind and solar power.
Out of the thirty-one countries operating nuclear power plants, twenty-five have never used or have ceased to use reprocessing. The La Hague plant has lost practically all of its foreign clients over the last decade, with the exception of the Dutch operator, which has only one reactor: it therefore only provides reprocessing service to 0.2% of installed nuclear capacity abroad. Areva holds almost around 90% of this global market, but currently the market consists almost solely of EDF.
The acquisitions of Constellation Energy in the USA by EDF and of Uramin by Areva cost them losses of at least €2.7 billion and €1.5 billion respectively, while the additional costs and delays of the Finnish EPR account for at least €3 billion more in Areva’s losses. Alone, these three items represent more than €0.5 billion in losses per year averaged out over the last ten years.
 Burdened by losses, EDF’s foreign activities are currently unable to finance the increasing requirements at home, where the production costs of nuclear plants are rising by around 5% each year and investment needs are increasing. Lifetime extensions at nuclear plants which No2NuclearPower nuClear news No.75, July 2015 8 Are on average more than thirty years old, could cost at least €110 billion. EDF does not seem to have the financial and industrial capacity today to successfully extend the life of all its reactors.
Areva has even less solid foundations than EDF. The Okiluoto fiasco with costs currently estimated at €8.5 billion as against the €3.3 billion initially projected and delays of more than nine years, significantly reduces prospects for new exports. Areva also suffered a great failure with the construction of a MOX plant at Savannah River in the USA, which has more than fifteen years of delays and soaring costs, to the extent that the project is all but shelved today.
The situation calls for not simply restructuring but a totally new direction. If the fundamental principles that have precipitated the French nuclear industry into its current crisis are not acknowledged, much effort and public money will be invested in an approach which is doomed to fail. The international trend is not for a nuclear renaissance but for a boom in renewable energy, and France will not be able to export significantly more reactors, or to develop new reprocessing contracts abroad under profitable conditions. The future of the French nuclear industry must urgently shift its focus to the maintenance of current reactors and decommissioning and nuclear waste management services.
To understand just how far the French nuclear industry has fallen in recent years, look no further than the value of EDF and Areva. Since 2007, EDF’s stock price has fallen more than 70%; Areva’s by more than 85%. If Areva weren’t 83% government-owned, it almost certainly would have declared bankruptcy by now. EDF’s problems, although not as severe as Areva’s– mostly because it is much larger and as the main electric utility in France at least has cash flow– may be structurally even greater. The basic problem is that EDF can no longer sell electricity for as much as its aging fleet of reactors cost to generate that electricity. EDF’s operating and maintenance costs for its reactors are increasing at about 5% per year–but its electricity rates aren’t. Nor can it easily raise its rates: there are legal issues involved for its regulated business and if it raises rates in its deregulated markets it won’t be able to compete. (2)
A new report by ADEME, a French government agency under the Ministries of Ecology and Research, concludes that a 100% renewable electricity supply scenario is feasible in France. The report estimates that the electricity production cost would be €119 per megawatt-hour in 2050 in the all-renewables scenario, compared with a near-identical figure of €117 / MWh with a mix of 50% nuclear, 40% renewables, and 10% fossil fuels. (3)
The EPR saga shows that even countries with extensive nuclear expertise and experience can mess things up. The EPR might have demonstrated the potential for mass production to drive down costs – but in reality it is demonstrating the opposite. Even before the EPR fiasco, the large-scale, standardised French nuclear power program was subject to a negative economic learning curve – costs were increasing over time. The EPR represents a negative learning curve on steroids.
France has now decided to rescue Areva yet again – this time by combining the nuclear power station construction business with state-controlled power operator EDF, its biggest client. Only a few years back, in 2010, Areva’s finances had been restored by the forced sale of its transport and transmission activities to industrial group Alstom and electrical engineer Schneider.
The rest of Areva includes uranium mines, nuclear waste recycling, transport, storage and some alternative energy activities. For all intents and purposes, Areva is dead. External factors may No2NuclearPower nuClear news No.75, July 2015 9 have precipitated the crash of Areva, but the cause is internal. Areva and the French nuclear industry is controlled by engineers and state officials and the market comes as an afterthought. The problems of time and cost overruns in China, Finland and now in France at Flamanville are self-made and part of the “esprit de corps” arrogant attitude of the organisation, says Forbes magazine. (4)
Suffering from the same delusions as the UK Government, the French Government said “This merger will allow for an ambitious export policy and the future renewal of France’s nuclear power plants.” (5)  (references supplied at the end of this article on the original site http://www.no2nuclearpower.org.uk/nuclearnews/NuClearNewsNo75.pdf)

July 6, 2015 - Posted by | business and costs, France, Reference

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